Oil-driven economic growth in the Gulf state of Kuwait is forecast to slow down this year and next year, as crude output is expected to remain flat, the National Bank of Kuwait said in a report yesterday.
After GDP grew by a healthy 6.1 percent in real terms last year, thanks to continued strong oil income, it is forecast to drop to 3.2 percent this year and to 2.5 percent next year, the bank said.
Following a massive contraction of around 8 percent in 2009 due to the impact of the global financial crisis, Kuwait’s economy gradually rebounded to grow by around 8 percent in 2011 as oil output and prices remained high.
Oil income in the OPEC member contributes an average of 95 percent to public revenues. Kuwait ended the past 13 fiscal years in the black and is forecast to post a huge budget surplus in the current fiscal year which ends on March 31.
Oil GDP, which grew by 15 percent and 10 percent in 2011 and last year respectively, is expected to remain flat this year and contract by around 1.5 percent next year, according to the bank’s report.
However, the bank revised upward expected non-oil GDP growth from 4 percent to 5 percent this year based on signs of greater determination by the authorities to implement large infrastructure projects.
Most projects under a US$110 billion four-year development plan, that runs until next year, have been stalled because of a political crisis in the emirate.
The opposition has staged protests to demand the dissolution of parliament elected last month on the basis of an electoral law that was amended by the emir, claiming that the change is illegal and aimed at electing a rubber stamp body.
However, over the past few months, authorities either signed or gave the green light for massive projects worth about US$40 billion, mostly in the oil and power sectors.
Inflation for this year and next is expected to remain moderate at between 3 percent and 4 percent.
Kuwait says it sits on around 10 percent of global oil reserves and pumps about 3 million barrels per day.
It is estimated to have US$400 billion in foreign assets run by the nation’s sovereign wealth fund.
The emirate has a native population of 1.2 million in addition to 2.6 million foreigners, mostly Asians and Arabs.